Ask Question
21 April, 20:10

If Ann were to convert some of her checkable deposits into a certificate of deposit, which of the following changes would take place?

a. M1 would decrease and then increase; M2 would increase and then decrease

b. There would be no changes to Ml or M2

c. Ml would decrease; there would be no change in M2

d. Ml would increase; M2 would increase.

e. M1 would decrease; M2 would decrease

+5
Answers (1)
  1. 21 April, 22:44
    0
    c. Ml would decrease; there would be no change in M2

    Explanation:

    M1 is one of the narrowest definition of money supply, M1 is defined as the currency held by the public plus demand deposits or checkable deposits balances.

    M2 is a wider definition of money stock than M1. It is important to note that M2 is a combination of m1 plus time deposits.

    If Ann converts some of her checkable deposits into a certificate of deposit, this action will decrease the balance in M1 because checkable deposits is a component of M1. But M2 will not change because M2 is a composition of both M1 and time deposit (i. e. certificate of deposit), it will only means a reclassification within the same class.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “If Ann were to convert some of her checkable deposits into a certificate of deposit, which of the following changes would take place? a. M1 ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers